Lucid Group (LCID 6.30%) has finally announced one number every investor was waiting for: its production guidance for 2023. Lucid has been one of the most-watched electric vehicle (EV) stocks as its Air cars are seen to be a threat to Tesla. Yet Lucid struggled to scale production in 2022 -- also its first full year of production -- and its painfully slow pace of production and deliveries has even hurt new orders in recent months. That's one of the biggest reasons why Lucid stock plunged 82% in 2022.
Lucid now says it is "gearing for growth," and if all goes well, it could produce double the number of EVs in 2023. Does that mean it's finally time to buy the beaten-down EV stock?
Where Lucid failed
Lucid shot to fame after one of its trims, the Air Dream Edition, beat the longest-rage Tesla car by 100 miles. Troubles started brewing soon, though, and Lucid failed miserably at execution.
The luxury car maker entered 2022 with a production target of 20,000 cars for the year. By the end of the second quarter, management admitted Lucid may not be able to build more than 7,000 cars thanks primarily to supply and logistics constraints.
Lucid just revealed that it exceeded its estimate and manufactured 7,180 electric cars in 2022.
A beat should have cheered investors, but Lucid's production guidance for 2023 fails to impress. What's even more worrisome is the company's dwindling reservation numbers.
The two biggest Lucid numbers you must know
Production and reservations are the most important numbers for investors in Lucid right now.
On Feb. 22, alongside its fourth-quarter numbers, Lucid said it expects to produce 10,000 to 14,000 units in 2023. That should come as a relief to investors as it means Lucid could double production this year if it hits the higher end of its guidance range. Unfortunately, that's still a big if as supply chain woes persist, and more importantly, Lucid still doesn't seem to be focusing where it should.
Here's what struck me: CEO Peter Rawlinson stated management's goal for 2023 is to amplify "sales and marketing efforts" to find more customers.
There's nothing wrong with marketing and selling more, as every EV maker wants to get its cars into more hands. What's questionable, though, is Lucid prioritizing sales and marketing over production and deliveries at a time when its existing orders seem to be getting canceled. At least that's what Lucid's latest reservation data points to: It reported reservations of only 28,000 as of Feb. 21.
That's a whopping 18% drop in just about three months and a huge drop from the 37,000 reservations that Lucid reported as of Aug. 3, 2022.
Clearly, Lucid is not only not getting many orders right now, but its low production and high wait times are also compelling some customers to cancel their reservations.
That's the worst problem an EV start-up could have.
Lucid is also seemingly failing to deliver as many cars as it should: While it produced 7,180 cars in 2022, it delivered only 4,369 cars.
Why Lucid stock can't stop falling
To be fair, all's not lost for Lucid. It generated $608 million in revenue in 2022 and halved its net loss to $1.3 billion in the year. And aside from the 27,000 reservations, Lucid also has a purchase commitment from the Saudi Arabian government for up to 100,000 EVs over the next 10 years.
Sadly, those orders mean little until Lucid fulfills them, and it seems like a tall task for the company right now given its dismal production target for 2023. Lucid is also burning through cash rapidly: It ended 2022 with only about $1.7 billion in cash and cash equivalents versus $6.3 billion as of the end of 2021.
With Rawlinson suggesting Lucid will increase spending on marketing this year, it's no wonder the stock is crashing today: It was trading 17.8% lower as of 10:25 a.m. ET Thursday.
At this price, Lucid stock may look enticing for a luxury electric car maker that wants to give Tesla a run for its money and has the backing of Saudi Arabia. Truth is, Lucid is a risky bet and will remain so until the EV maker shifts its focus and decides to "amplify" its production and delivery efforts instead of sales.
